When selling a veterinary practice, it’s important to remember that it’s not just about getting the best price. It’s also about letting go of something you’ve built and finding the right person to take it to the next level.
Here’s a step-by-step guide on how to do it like a pro.
Step 1: Prepare For The Sale
Before looking for buyers, take a hard look at your practice. What are its strengths and weaknesses? What are the areas that need improvement? The better you understand your business, the more successful you’ll be in positioning it for sale.
Where possible, make the necessary changes to increase the value of your practice. For example, consider giving it a new look if your practice lacks curb appeal. Or, if the technology and equipment are non-functional, consider fixing them or investing in upgrades.
Other steps include:
- Document all aspects of your business operation so potential buyers can see how well things run daily (this includes employee handbooks).
- Performing financial analysis to show potential buyers how much money they can expect to make with this business (you can get help from an accountant).
And it gets better…
Here’s a to-do list to help you stay organized and on track when preparing to put our practice up for sale:
- Review financial statements.
- Identify areas that need improvement.
- Make necessary changes to increase the value of the practice.
- Compile a list of assets and equipment.
- Prepare Executive Summary.
- Determine the worth of your business (more on this in the next step).
- Seek advice from a business advisor or financial advisor.
Step 2: Determine The Value Of Your Vet Practice
Once you’ve prepared your practice for sale, it’s time to set a selling price.
Listen carefully:
Make sure that your asking price is reasonable yet profitable. If you’re selling at a premium, buyers may be hesitant to buy from you because they think they need to raise prices after closing to get their money back. On the other hand, if you’re selling at a discount compared with other practices in your area, buyers may assume there’s something wrong with your business and pass on buying from you altogether!
Hence the need for vet practice valuation.
Simply put: Vet practice valuation is an independent opinion of what your practice is worth based on several factors such as location and size; potential for future growth; ease of access; and quality of staff and equipment.
Several methods are used in arriving at what a vet practice is worth. They include:
- Earnings Multiplier Method: In valuing a veterinary practice using this method, its earnings are multiplied by a pre-determined industry multiple.
- Discounted Cash Flow (DCF) Method: This valuation method involves forecasting the business’s future cash flows and discounting them back to present value.
- Comparable Sales Method: This method involves using the sale prices of similar vet practice(s) sold in the same geographical area and using it as a yardstick to establish a asking price.
- Asset-Based Method: A practice’s worth is determined based on its tangible and intangible assets, such as real estate, equipment, and goodwill.
Step 3: Find the Right Buyer
Finding the right buyer for your practice is crucial. The right buyer should have the experience and resources to take over your practice and grow it to its full potential.
Part 1: Attracting Interested Buyers
In other words, put the word out that your veterinary clinic is for sale.
One way to find a qualified buyer is to use a vet practice broker to help you find a buyer and negotiate the sale. Alternatively, you can also advertise the sale of your practice to the local community or through professional networks such as veterinary associations.
Summary for looking for a qualified buyer with experience and resources to take over the practice:
- Use a business broker to find buyers and negotiate the sale.
- Advertise the sale of your vet hospital through various channels:
- Digital media (social media, email, Google, websites, etc.).
- Professional associations or networks.
- Traditional platforms such as radio, TV, and news publications.
Part 2: Vetting The Buyer
Time to curb the urge to accept the first buyer that comes along.
Do some due diligence.
The buyer must have cash, a good credit rating, and a willingness to close quickly. Another area for improvement is whether the buyer has experience running a veterinary clinic.
In any case, here are 3 time tested tips for vetting potential buyers:
- Interview them over the phone. Don’t leave anything to chance, so ask.
- Check their credit scores.
- Invite them over to your practice for a day or a half. This will help ensure that the buyers get to experience how your practice operates in real-time. It would also allow you to interact with them better.
At the end of this step, ensure your buyer demonstrates their commitment with a Letter of Intent/Interest (LOI).
The LOI is a document stating a buyer’s intent to complete the transaction. This is important because it allows you to confirm that your buyer is serious about buying your practice. However, note that the LOI is legally non-binding.
Step 4: Negotiate the Terms of the Sale
When you find a buyer that meets your criteria, it’s time to negotiate the terms of the sale. This is where many sellers make the mistake of cutting corners, but it’s essential to be thorough and fair when setting the terms of the sale.
Agree on the purchase price, payment terms, and any contingencies, such as the buyer’s ability to secure financing. Ensure all legal requirements, such as licenses and permits, are in order before closing the sale.
Step 5: Close the Deal
Once you’ve agreed to the terms of the sale, it’s time to close the deal. The ownership of the practice is then transferred, and you can receive payment for the sale.
Make sure to have a lawyer review all the paperwork to ensure everything is in order and your interests are protected before you sign the dotted line.
Conclusion
Selling a vet practice can be a bit of a hassle, but if you follow these steps and avoid the temptation to cut corners, you’ll be able to sell your practice with confidence and with the best chance of sitting pretty with a solid paycheck in no time.